Monday, March 14, 2016

Trump, Cruz, and a 45% Tariff

On CNN's March 10th Republican debate, Ted Cruz said that Donald Trump wants to impose a 45% import tax on foreign goods.

First of all, Trump never said he would impose a 45% tax on all foreign goods.  What he did say before the Michigan primary is that he would punish, specifically Ford, with a 35% (not 45%) importation tax for moving a manufacturing facility from Detroit to Mexico.  But, the real stupidity in the sparring following Cruz's 45% remark, is that Trump started to defend the 45% tax as if that's what he had actually proposed (see video referenced below).

Putting that aside, this Trump war being waged against Ford by a supposedly astute businessman completely belies the complexities of the decision to build a new plant in Mexico.  Ford's decision is one of either move it or lose it.

Right now, because of low gasoline prices, people are moving back to buying crossover SUV's rather than more fuel efficient sedans.  On top of that, because the automobile companies have become more profitable again, the United Auto Workers union was able to negotiate an expensive wage and benefits package after years of concessions following the bankruptcy of GM and the potential bankruptcy of Chrysler; had Fiat not agreed to buy Chrysler.  So, its either move the less profitable sedan manufacturing, or otherwise, shut them down and discontinue existing sedan nameplates that have already become less competitive on the world stage.  This is why all three U.S. manufacturers of automobiles are producing cars in Mexico; not only Ford.

Also understand, the current union contract requires Ford to replace any discontinued manufacturing with new operations so that union jobs are protected. So, what Ford will do, is replace the sedan production that went to Mexico with new, expanded SUV production in any vacated plants. Thus, the belief that Ford is sending jobs to Mexico is just plain wrong.

The issue here is simple.  Ford is making changes now, so as to avoid becoming another GM-style bailout. But, Trump, who himself has declared bankruptcy 4 times, either doesn't seem to understand this or is just fine with it.


Trump: ‘45% Tax Is a Threat, It Was Not a Tax, It Was a Threat’:

Trump Targets Ford [with 35% tax] Ahead of Michigan Primary:

Why Ford and Fiat Chrysler are Giving Up on Making (Most) Cars in America:

Why Ford Is Planning to Make More Cars in Mexico:

TRUMPED: The Donald Has Filed For Bankruptcy Multiple Times. What's His Strategy, and What Can It Teach You?:


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